Puravankara Projects IPO – The India Street Analysis

Summary The Issue: With so many real estate IPO’s entering the capital market will there be reasonable returns from this stock in long term? The Answer: We expect yes as this company is backed by decent financials, good experience and strong marketing network.

Puravankara Projects Limited is a Bangalore based real estate developer company with more than 30 years of presence in Mumbai, Bangalore, Kochi, Chennai, Coimbatore, Hyderabad, Mysore, Colombo and the United Arab Emirates (U.A.E). Its public issue opens July 31, 2007 and closes on August 3, 2007. Business Overview: The operations of the company include identification/acquisition of land, planning, executing and marketing of real estate projects. Both residential and commercial projects are executed. Residential projects consist of apartment complexes, villas and townhouses while commercial projects include retail and office premises. The company was originally incorporated as Puravankara Constructions Private Limited in 1986 at Mumbai. In 1992 it was made a public limited company and the name was changed as Puravankara Projects Limited. The total land area available is 38.07 million square foot, developable area is 116.24 million square foot and saleable area is 106.80 million square foot. The company’s real estate development is concentrated primarily in southern India i.e. Bangalore, Chennai and Kochi. It has also acquired roughly 1.06 million square foot of land in Colombo for luxury residential project consisting of independent villas and townhouses. The list of completed projects so far is given below:

At Mumbai:
Project Name Uran Park, Mora Road Saleable area 0.02

At Bangalore:

Project Name Purva Park, Cox Town Castlemaine, Jayamahal Road Purva Nest, Cambridge Road Purva Graces, Yelahanka Purva Iris, Cox Town Purva Heights, Bannerghatta Road Purva Paradise, Domlur Purva Fairmont, Koramangala Purva Pavilion, Hebbal Purva Parkridge, Marathahalli Purva Carnation, Cox Town Whitefield Bouganvilla Purva Riviera, Marathahalli

Saleable area 0.50 0.02 0.01 0.17 0.06 0.35 0.05 0.41 0.24 0.35 0.08 0.07 1.26

Saleable area is in million square foot.

The company has also completed a commercial project, The Pavilion, on M.G. Road, Bangalore and it is ready for occupation. One more commercial project is being undertaken at Chennai with a saleable area of 0.35 million square foot. There are 4 residential projects currently under execution at Bangalore on land that is owned by the company with a saleable area of 6.41 million square foot. These are Purva Grande (Lavelle Road), Purva Fountainsquare (Marathalli Junction), Purva Venezia (Yelehanka) and Purva Highlands (Kanakapura Road). Similarly there are two ongoing projects at Chennai. These are Purva Swanlake (Old Mahabalipuram Road), Purva Jade (Arcot Road) with a total saleable area of 0.92 million square foot. In addition, at Kochi, there are three more projects currently in progress. These are Purva Grand Bay (Marine Drive), Purva Eternity (Kakkanad), Purva Moonreach (Airport Road) with saleable area of 1.86 million square foot. The company also executes 5 more projects at Bangalore on joint development basis with a total saleable area of 1.44 million square foot.

A view of the Purva Fairmont, HSR Layout, Koramangala, Bangalore The company has entered into a joint venture (Keppel Puravankara Projects Private Limited) with Keppel Investment Mauritius Private Limited, a subsidiary of the Singapore based Keppel Land Limited. Elita

Promenade, a residential project in Bangalore, is being executed with a saleable area of 1.22 million square foot by this joint venture. Through its IPO the company plans to mobilize Rs.1,125 crores at the upper price band of Rs.525, which shall broadly be used for repayment of loan of Rs.420 crores and Rs.351 crores for acquiring 43.56 million square foot land in and around Sriperumbudur and Kancheepuram near Chennai. After the IPO promotors shall have 89.95% stake in the company. Financial data:
Item Income Expenditure Profit before tax Net profit Item Income Expenditure Profit before tax Net profit 2003 41.35 32.29 9.06 6.49 2006 280.42 197.81 82.61 73.45 2004 76.38 59.94 16.44 15.44 2007 416.86 284.53 132.33 130.40 2005 151.03 110.60 40.43 38.02

All figures in Rs. Crores. Comparison with some listed companies:
Company BLKASHYAP PENINLAND ANSAL ** PURVA ** EPS 43.80 57.00 9.40 6.80 P/E 35.00 8.60 29.90 77.20 * Book value 237.80 104.80 80.50 11.50

* At the upper price band. ** Face value of Ansal and Puravankara is Rs.5.

IPO Details: Issue Period: Issue Size: Face Value: Price Band: Market Lot: Minimum Quantity: Retail Investor Limit: July 31, 2007 to August 03, 2007 21,467,610 Equity Shares Rs. 5 Rs. 500 to Rs. 525 10 shares 10 shares Rs.100,000

Click here to download application form. Click here for Red Herring Prospectus. Conclusion: Puravankara has a strong presence in southern India, where lot of IT companies have set up their operations. After Sobha Developers, Puravankara is the second Bangalore based realty major to enter the capital markets. The company sells the real estate properties directly to the customers with marketing offices in India and UAE. The strong marketing network will help the company to reach the large NRI population in Gulf countries. Puravanakara has the industry experience and technical expertise. Moreover, it owns nearly 43% of the developable land which gives a distinct advantage. At the upper price band Rs.525, EPS of 6.80 and P/E of 77.20, the stock may be slightly expensive but there seems to be some considerable upside, based the growing demand in real estate industry and company’s ongoing / proposed projects.

Sundaramurthy Vadivelu LABELS: PURAVANKARA PROJECTS, IPO, INDIA STOCK MARKET, REAL ESTATE, SOBHA DEVELOPERS, REALTY INDEX

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